Oil prices fell on Monday, continuing last week’s losses. As concerns about slowing global economic growth overshadowed supply shortages.
Brent crude futures were down 50 cents, or 0.44%, at $112.62 a barrel at 1429 GMT. The previous month’s prices fell 7.3% last week for their first weekly drop in five.
U.S. West Texas Intermediate crude fell 68 cents, or 0.62%, to $108.88. The previous month’s prices fell 9.2% last week for the first drop in eight weeks.
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“Friday’s sharp fall in prices shows as a late reaction to recession concerns. Recession concerns have already been weighing on the prices of other commodities. The weighing is for some time” Commerzbank analyst Carsten Fritsch said.
Analysts and investors said they believe a recession is more likely after the U.S. Federal Reserve approval. U.S. Federal Reserve on Wednesday approved the biggest interest rate hike in more than a quarter-century to contain a rise in inflation.
Last week saw similar tightening approaches by the Bank of England and the Swiss National Bank.
Brent crude futures hit their lowest level in a month on Monday, but some analysts expect the drop to be short-lived.
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“Supplies will remain scarce and will continue to support high oil prices. The norm for ice Brent is still around the $120/bbl mark,” said PVM analyst Stephen Brennock.
“The price had been going up for the previous month. The bullish case is still much more compelling,” said Craig Erlam, senior market analyst at OANDA.
Western sanctions have reduced access to Russia’s oil. It happens after it invades Ukraine, which Russia calls a “special operation.”
While China’s crude oil imports from Russia in May soared 55% from a year earlier to a record level. The record level displaces Saudi Arabia as the top supplier. China’s export quotas have resulted in a decline in oil product shipments.
Tight refined product markets have supported oil prices.
Analysts expect limited increases in the summer from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+.
Libya’s oil production has remained volatile following blockades of groups in the east of the country, with its most recent set output at 700,000 per day.
Meanwhile, the prospects for relief from Iranian sanctions are waning, which could result in a significant increase in the country’s crude exports.
There has been some mitigation for supply shortages with the release of strategic oil reserves, led by the United States. U.S. production is also rising, according to rig counting data from energy services firm Baker Hughes Co.
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